Real Estate

Prime Rate goes up again - what should you do?

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Posted by Kyle Green

on Monday, 18 September 2017 16:43

interest rate

The Bank of Canada announced another rate hike to the overnight lending rate (which is what the banks base their prime rate on) again by .25%, going to 1%. Subsequently, the banks moved up .25% as well. The reason for the move was impressive growth that was nearly triple the previous quarters'. 

After the previous rate hike earlier in the year, Stephen Poloz put the country on notice that they may be raising again during 2017 and with strong data in July and August, they decided to hike the rate. 

Now, this is in general good news for Canadians. It means that most provinces are not in a recession (with AB finally climbing out of the hole) with strong economic growth almost across the board. Keep in mind too that the reason for the rate decreases in 2015 was primarily due to oil price concerns, and with AB in the black again it was a fairly easy decision to go back to square one again.

The question we've been getting a lot is should we lock in our variable rate mortgages? Keep in mind that fixed rates have gone up over the past few months, so you'll likely be locking in to a rate over 3%. Many of you with variable rate mortgages will still be lower than the fixed rate you would be locking into. 

More importantly though, is the potential penalty to break a 5yr fixed rate mortgage compared to a variable rate mortgage. The penalty is max 3 months interest in a variable and either 3 months interest or an IRD (Interest Rate Differential) in a fixed rate. I wrote a good blog post about how the banks calculate these penalties (in an unfair way) that you can read here. We have found that currently this penalty is about 5x more expensive than the 3 month interest penalty. Recently we ran an estimation for a client who's penalty would be $9,000 if they took a variable and between $47,000 - $54,000 to break a 5yr rate if they cancelled it in 1-2 years. WOW!

Many of you are probably thinking that you won't be breaking your mortgage. But believe it or not, 6/10 borrowers who take a 5yr mortgage break it early. That's much higher than you would expect. Life happens.

So what should you do? We are still advocating sticking with the variable. There will be ups and downs (right now is an up) but this world is still very volatile and there are still a lot of things that can happen. F

Kyle Green

DLC Homeline Mortgages

Homeline Financial Services Inc.


Office:        604-229-5515

Toll Free:   1-888-531-8890

Fax:              1-866-551-8836



Real Estate

Mortgage rules a major roadblock

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Posted by Canadian Real Estate Wealth

on Tuesday, 29 August 2017 06:22

mortgage rules conceptLast year’s mortgage rule changes are clearly impeding young buyers from breaking into the housing market, according to one veteran, but there is an even larger obstacle in the way.

“One of the things that came out of the report was millennials impression that the government’s actions relating to restrictive actions to mortgage insurance was an impendent,” Phil Soper, president of Royal LePage, said. “Yet, I’d say a larger impediment was 20% year-over-year price appreciation.”

According to Royal LePage’s most recent report, 49% of peak millennials believe the federal government’s mortgage regulations have impacted affordability.

As a result, they have been forced to consider lower-priced homes.

“When looking for a home, 53% of peak millennial purchasers across Canada are willing to spend up to $350,000, which would typically buy them a 2.5 bedroom, 1.5 bathroom property nationwide, with 1,272 square feet of living space,” the report reads. “Yet, with 58% of respondents having a annual household income of less than $69,000, and only 34% currently tracking to have a sufficient down payment of over 20 % to qualify for a mortgage in this price range, the actual logistics of homeownership can be quite difficult.”



Real Estate

Canadian Housing Starts - City and Provincial LONG TERM CHART vs population growth since 1956​

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Posted by Brian Ripley's Canadian Real Estate Charts

on Tuesday, 25 July 2017 07:32

“The trend in housing starts for Canada reached its highest level in almost five years”, said Bob Dugan, CMHC’s chief economist. “So far this year, all regions are on pace to surpass construction levels from 2016 except for British Columbia, where starts have declined year-to-date after reaching near-record levels last summer.” CMHC News Room
NOTE: The chart below shows the actual annual totals count from 1956 through 2016.

​The 2017 data points on the chart are derived from the "annualized" provincial data set in the charts above and are therefor a projection of what year end 2017 might look like.
Projected Year End 2017 Totals
Canada = 190,424 (-4% Y/Y)
ON = 74,310 (-1% Y/Y)
​QC = 35,100 (-9% Y/Y)
​BC = 39,131 (-7% Y/Y)
​AB = 25,423 (-4% Y/Y)

chart-starts-1956-2017 orig

....view more HERE



Real Estate

Is Canada in "Serious Trouble"?

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Posted by Zero Hedge

on Wednesday, 19 July 2017 11:21



One week after we channeled Deutsche Bank's Torsten Slok, who two years ago warned that "Canada is in serious trouble", a warning which was especially resonant after last week's rate hike by the Bank of Canada - the first since 2010 -  which we argued threatens to burst Canada's gargantuan housing bubble... CLICK HERE for the complete article


Real Estate

Housing Price Momentum and the Millionaire Metric

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Posted by Brian Ripley's Canadian Real Estate Charts

on Monday, 10 July 2017 08:09

chart-housing-momentum 6 orig


larger chart

HOUSING PRICE MOMENTUM Y/Y RATE OF CHANGE for Vancouver, Calgary, Toronto Single Family Detached Prices and the TSX Real Estate Index

....read more on the Housing Price Momentum HERE and the Millionaire Metric HERE


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